Trump moves into Washington
Family’s latest upscale hotel has gone through a soft opening in a buoyant market
renovation, funded mainly by a $170 million construction loan from Deutsche Bank AG that was guaranteed by the Republican presidential candidate. The hotel will have an official opening in late October, before the November 8 election.
Win or lose that contest, Trump is poised to cash in on the inauguration in January, when celebrities, party loyalists, foreign dignitaries and business executives will descend on Washington. Hotels typically boost their rates, which can run into thousands or even hundreds of thousands of dollars with minimum stays and nonrefundable prepayment. Rates for inauguration week at the Trump hotel will begin at $1,250 a night.
There’s a $500,000 package that includes first-class round-trip air tickets, custom Brioni suits, dinner for as many as 24 guests, spa treatments and Trump family commemorative plates.
“We will be sold out for inauguration,” said Mickael Damelincourt, the hotel’s managing director, who previously ran the hotel in the Trump International Hotel and Tower in Toronto, whose developer has been trying to cancel its licensing contract. That project is managed but not owned by the billionaire’s company.
Shareholding pattern
The Washington hotel is controlled by Trump and his family. Donald Trump owns 76.725 per cent of an entity called Trump Old Post Office LLC, which leased the property from the government, and Ivanka, Donald Jr. and Eric each own 7.425 per cent. Trump contributed more than $42 million to the project, according to David Orowitz, a senior vice-president at the Trump Organization.
Ivanka has emerged as not just a key political adviser to her father but also as the most public face of the family in terms of the future of the Trump brand. Hotels are arguably the one property type where branding matters most, and Ivanka has built a brand of her own, with a lifestyle website and licences for apparel, jewellery and shoes aimed at consumers seeking to emulate her image as a glamorous working mom.
Sometimes her marketing has backfired. She and her older brother Donald Jr. were criticised for claiming they bought condos in the Trump Ocean Resort Baja in Mexico and exaggerating their family’s involvement in the project. The resort never got built, and most of the buyers, who had lost $32.5 million of deposits, sued.
They recovered about $7 million in one settlement and an undisclosed amount in another. Other Trump hotel-condo projects have run into problems. Lender CIM Group seized the Trump SoHo project in 2014 after the condos failed to sell as projected.
Ivanka and her brothers formed Trump Hotels, a management company, in 2007. They opened the first Trump International hotel and condo tower in New York and now have at least 15 properties in North America, Scotland, Ireland, Panama and Brazil, some of which they own.
Many of the hotels have received industry accolades. The New York one houses a three-Michelin-star restaurant by Jean-Georges Vongerichten. It’s next door to 15 Central Park West, the ultra-luxury condo project whose buyers have included Goldman Sachs Group Inc. CEO Lloyd Blankfein and singer Sting.
The Washington hotel has had a bumpier time with food offerings. Spanish chef Jose Andres withdrew from a planned restaurant at the property because of Trump’s anti-immigrant comments during the campaign. A day later Geoffrey Zakarian pulled out of a second venue for the same reason. Lawsuits stemming from their departures are pending. Only one restaurant, BLT Prime by David Burke, will be in the hotel when it opens.
Luxury hotels in Washington have performed on a par with similar properties across the country. The average occupancy rate in greater Washington was 76.6 per cent year to date through July, according to STR. While that was little changed from a year earlier, average room rates were up 3.2 per cent, STR data show. That boosted the revenue per available room, the industry measure of demand, by 2.6 per cent.
Rates at Trump’s Washington hotel are well above what other luxury properties in the city charge. A standard room at the Trump hotel goes for $625 a night in mid-February, normally a weaker month for demand, compared with $459 for the Hay-Adams and $342 for the Willard InterContinental.
The suite Ivanka chose to carry her name is a duplex in the building’s clock tower with views up and down Pennsylvania Avenue and a circular wrought-iron staircase leading to a library.
David Bernand, general manager of the Four Seasons hotel in Washington, the current rate leader in the market, said the new Trump property will boost the cachet of the city as a luxury destination and provide some tough competition.
“If there’s one thing they’ve been good at doing, it’s to sustain their rates — they may do that at the expense of occupancy at times,” a strategy followed by many high-end hotels, including the Four Seasons, said Bernand. “If you have a luxury product, it’s important to not drop your prices when quality remains the same, despite the demand.”
It’s hard to predict how the hotel will perform after the inauguration, especially if Trump loses. Conventions such as the spring and fall meetings of the International Monetary Fund and World Bank, are big draws, as is the Fourth of July. Washington had a record number of visitors last year, yet the city, unlike London or Paris, isn’t its country’s Centre of finance or its main tourist destination.
And with 900 new luxury rooms coming on the market, including Trump’s, the competition will be fierce. One plus: Demand for big suites, often for long-term stays, is high.
If Trump is elected president, he will have to address questions about conflict of interest in any negotiations between his family and the General Services Administration, the federal agency that in 2012 awarded Trump a 60-year ground lease, with potential for two renewals of 20 years each. The GSA said it would answer those questions after the election.
Trump will probably place the Trump Organization in a blind trust if he’s elected, and his three grown children from his first marriage would run it, a spokeswoman for the company said in an email. “Mr. Trump would not be involved,’’ she said, declining to comment on how potential conflicts would be handled.
One person who’s familiar with Trump’s history in the hotel business is Tom Barrack, chairman of Colony Capital Inc. and a supporter of the Republican candidate. Barrack exited as a partner in the Washington hotel in 2013 because the project’s timeline became “too long for the firm,” he said in a statement. “As the project became more evolved, cheaper sources of capital for longer-term investment became available to Trump.”
Barrack represented billionaire Robert Bass in 1988 when Bass sold New York’s Plaza Hotel to Trump. Revenue increased and Trump won praise for the hotel’s new interiors, but renovation and interest costs ate into performance. When the economy weakened, Trump lost the hotel in 1992 as part of a restructuring of $900 million of loans tied to various deals.